Exercise 7-4 Your accounts receivable clerk, Mitra Adams, to whom you pay a sala

Question

Exercise 7-4 Your accounts receivable clerk, Mitra Adams, to whom you pay a salary of $2,535 per month, has just purchased a new Acura. You decide to test the accuracy of the accounts receivable balance of $138,580 as shown in the ledger. The following information is available for your first year in business. (1) Collections from customers (2) Merchandise purchased (3) Ending merchandise inventory (4) Goods are marked to sell at 40% above cost $334,620 540,800 152,100 Compute an estimate of the ending balance of accounts receivable from customers that should appear in the ledger and any apparent shortages. Assume that all sales are made on account. The ending balance of accounts receivable from customers Apparent shortage

Explanation / Answer

Computation of cost of goods sold

Merchandise purchased      $ 5,40,800

Less: Ending inventory       $ 1,52,100

Cost of goods sold               $ 3,88,700

Selling price   = 1.40 (Cost of good sold)

= 1.40 x $ 3,88,700

= $ 5,44,180

Sales on account                  $ 5,44,180

Less: Collections                  $ 3,34,620

Uncollected balance            $ 2,09,560

Balance per ledger               $ 1,38,580

Apparent shortage                $ 70,980

The ending balance of accounts receivable from customers = $ 2,09,560

Apparent Shortage = $ 70,980

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